What Percentage of Credit Reports Contain Errors?

In the credit reporting world the subject of data inaccuracy is a lightening rod topic that is passionately debated. Depending upon whom you believe, credit report errors are either quite rare or extremely common. There have been three generally recognized and often-cited credit reporting accuracy studies and their results are wildly different. So just how many credit reports contain errors?

According to the US Public Interest Research Group…

In 2004 the U.S. Public Interest Research Group (US PIRG) conducted a study regarding the accuracy of credit reports. The PIRG study sought to identify the percentage of credit reports that contained any error, whether that error was serious or superficial. The results of the study concluded that an alarming 79% of credit reports contained an error of some kind.
The results of their study should come as no surprise as the US PIRG is a passionate consumer advocacy group. Its members are not fans of the credit reporting agencies or their processes and they’re basically opposed to and critical of everything they do, which calls into question their legitimacy. Another reason people often scoff at PIRG’s findings is that a microscopic 197 consumers were used as the sample set for their study. With over 650,000,000 consumer credit files in circulation the issue of statistical relevancy becomes a problem for them.

According to the Policy and Economic Research Counsel…

In 2011 the Policy and Economic Research Council (PERC) published the results of their own study regarding the accuracy of credit reports. The purpose of the PERC study was to identify the percentage of “material errors” found in credit reports. A material error, per the study, was defined as an error that, once corrected, resulted in an increase of more than 25 points in a consumer’s credit score. The PERC study proposes that 99% of credit reports do not contain material errors. In fact, to be more precise, the study states that according to their research only a mere 0.93% of credit reports contained a material error.
The PERC study paints a rosy picture of the credit-reporting environment, but are their results any more valid than the PIRG study results? There are at last three reasons you should take their results with a grain of salt.
1) The PERC study received funding from not only all three of the credit reporting agencies (Equifax, Trans Union, and Experian) but also from the CDIA, the trade association of the credit reporting agencies.
2) The CDIA was actually invited to review drafts of the studies and offer input prior to the release of the final findings.
3) The PERC study also used a very small sample of consumers for their study numbering only 2,338.
I’m not suggesting the PERC study results were “bought” by the credit industry. But, at the very least you should be aware of who PERC works for and who is paying their bills.

According to the Federal Trade Commission…

In 2013 the Federal Trade Commission (FTC) released the results from their highly anticipated credit report accuracy study. The FTC study suggests an error rate ranging between 10% and 21% depending on the definition of “error” being used. To put 10% to 21% in perspective for you, what the FTC study is actually suggesting is that somewhere between 60 million consumers and 120 million consumers have at least 1 confirmed error on one of their credit reports. The FTC study splits the difference between the PIRG and PERC findings.
The FTC also used a small sample of consumers when conducting their research. Only 1,001 study participants were included. The low sample number is problematic and can lead to questions about their findings. In fact, all three studies are based on samples that are arguably not representative of the roughly 230 million consumers with credit files currently in circulation.

So Who’s Right?

Since the FTC study is the newest of the three, it is the study that is most widely cited. Regardless of which study paints the most realistic picture of credit report accuracy, the fact of the matter is that even one error that leads to lower credit scores can be a big deal. And whether you believe 78%, 1% or 21% of reports or consumers contain errors the reality is that the only credit reports that matter are the three that belong to you.
According to this article by CRE Credit Serivices, checking your credit report regularly is the only way to keep track of inaccuracies and maintain your credit score. You should be checking your credit score at least quarterly to stay on top of errors and keep your scores high.

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